Elderson, named one of the 100 most influential business leaders in climate by TIME in 2025, explained why climate change plays a central role in the ECB’s mandate. “Climate, nature, and the economy are closely interconnected and interdependent. The climate and nature crisis is a source of financial risk,” said Elderson. “If central bankers and supervisors are to effectively carry out their tasks, they must consider the impact of this crisis on inflation and the soundness of banks.”
He pointed to the tangible consequences of climate change, such as the 2022 heatwave, which increased food price inflation in Europe by 0.8 percentage points. “Extreme weather events disrupt supply chains, reduce harvests, and drive up prices. This has a direct impact on our economy,” Elderson stated.
Further and faster
Although Europe has made progress, Elderson warned that current policies are putting the continent on a warming trajectory of 3.1 degrees Celsius – far from the 1.5-degree target. “A late, abrupt transition would weaken the economy and increase losses for the financial system,” he said. “The United Nations has warned that global investments in climate mitigation need to increase sixfold to meet the goals of the Paris Agreement.”
Nevertheless, Elderson remains optimistic. “The share of renewable energy in the EU has more than doubled between 2005 and 2023. Last year, nearly half of the EU’s electricity was generated from renewable sources,” he said. “We know progress is possible, but now we must go further and faster. A quicker transition is less costly and can provide a competitive advantage.”
Role of the Financial Sector
Since 2020, the ECB has taken steps to encourage banks to better manage climate risks. “Initially, less than 25% of banks had made progress on climate risk management,” Elderson explained. “Now, most banks have met the 2023 targets, but some are still lagging behind and risk sanctions.”
In 2025, Elderson aims to ensure that banks fully account for climate and environmental risks in their strategies and risk management. “We will, if necessary, use all available tools to make the banking sector future-proof,” he said. “Transition plans are crucial to prepare banks for the risks of the green transition.”
Elderson endorsed former ECB President Mario Draghi’s call for further financial and economic integration within the EU, such as the introduction of a Capital Markets Union. “An integrated capital market is essential to channel private financing towards green innovation,” he explained. “The European Commission estimates that the EU will need an additional €477 billion in green investments per year by 2030. This figure rises to €620 billion when broader environmental ambitions are taken into account.”
Elderson concluded with a call to action. “The reality of the climate and nature crises is not changing. We must face it head-on,” he stressed. “By working together – as central banks, supervisors, governments, and private actors – we can make the economy and the banking sector future-proof. Time is running out, but the opportunities are there.”
See the NVDE website for the full interview (in Dutch)
Image: Anski/Shutterstock
